Silver Lining of the Recession: A Buyer's Watch Market

A Watch Buyer’s Market?

Due mainly to the effects of the global economic crisis, the market values of new and pre-owned luxury goods is said to be decreasing. The law of supply and demand dictates that when the demand for a product steeply diminishes and the supply remains steady, prices are bound to fall. That said, luxury wristwatches are known to be elastic goods, meaning they are far from being “necessities” to the vast majority of the population, unlike food, where prices have remained constant, and in some cases even increased. With many peoples’ net worth shrinking, a high unemployment rate, and instability in investments, all facets of the economy are affected, involving all classes of the social system.

According to the US Federal Reserve, the wealth of American families crashed nearly 18% in 2008, while some economists predict unemployment to rise to as much as 9.4% in 2009- thus creating less flexibility for erroneous spending. In talking to jewelers across the country and studying retail and the second-hand market environments, the effect of poor economic confidence, a shrinking economy, and inability to predict an end to the crisis, the retail market for luxury goods is suffering. For instance, same store sales for Saks 5the Avenue, Neiman Marcus, and Nordstrom have decreased by 26%, 21%, and 15% respectively. This has led to retail price slashing, with MSRP no longer being valid as nearly everything is put on sale.

There are even more daunting examples- an untitled Ferrari F430 Spyder going for $300,000 in 2007 now can be found for $220,000. Estates in the Hamptons are going for 50% off peak prices from 2006. Now, is it the same for high end watches? Yes, it is, for the most part. Jewelers who offered very little to no discounts for historically high-demand watch brands such as Rolex and Patek Philippe are now offering strong discounts on their inventory, while not as deep as on other brands. From boutiques in the Caymans to Hong Kong’s Queen’s Road Central, the discounts by authorized dealers are more aggressive than they were just a few months ago. And as far as the pre-owned market, including non-authorized dealers, personal buyers and sellers, and auction houses, the prices have dropped as well. For example, Cartier, which is among a handful of brands that holds value well has seen some of its top-selling watches lose value in these tough times. A pre-owned men’s Cartier Roadster Chronograph was selling for around $4,200 and now they are easily found for $3,700 or even less.

For those who still have the discretionary income, or at least the cajones to spend in this market, this is definitely the time to buy. However, I would buy watches that are not so common, such as vintage or limited edition pieces. One watch I would like to get my hands on right now is a vintage Rolex Explorer II 1655 “Steve McQueen” from the early 1970’s, which was trading at around $20,000+ in March 2008 and can now be had for less than $15,000 (similar conditions and provenance). Another is a Panerai 249 “California Dial” Special Edition, which was originally released in 2006, is now selling used for $11,500 and just 6 months ago the going price was over $14,000. Interestingly enough, in 2006 the retail price was a mere $5,800! Sure, it is still a steep climb from the original retail price, but those who truly understand the Panerai market will attest that this watch is not only original and unique, but is among the most collectible Panerai made in the past five years and is indeed discontinued. Of course, these are examples of watches I would wear and truly appreciate. As far as truly “investing”, for the purpose of “flipping”, I would advise you to hold off.

As stated above, the markets right now are being clobbered and those who fear the apocalypse, or at least economic apocalypse, is near, then you are right- why spend so much on watches when we can invest in “surer” bets, such as commodities. But, I know for a fact that there are those out there relishing these times, picking up many of their favorite pieces that they will proudly wear through the next economic boom. Think you’re doing well and have secured a nice nest egg and bulletproof income security and want to buy yourself a nice gift? Pick up that used Rolex Milgauss for $3900. After all, they sold as much as 25% above the $5950 retail price just 18 months ago.